A “short sale” is when a property owner is forced to sell for less than the mortgage amount. The mortgage holder usually has to approve the sale, because they usually don’t get all the money they are owed. The mortgage company usually has to “forgive” this debt and write it off. Until this week, that forgiven debt was considered “income” by the IRS! Talk about adding insult to injury: the property has negative equity; the property owner can’t afford to just hold the property until that situation changes; the mortgage company has to walk away with a loss; and the taxman wants his cut!

Congress fixed that on Monday. Now families that dodged the foreclosure bullet will not have to pay a huge tax bill with money they clearly didn’t have in the first place. Tim Iocono has the details and a bit of analysis in a post called “A Nice Stocking-Stuffer from Congress“.